Allegheny Power 2011 Annual Report Download - page 71

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regulation of coal combustion residuals, including the option of regulation as a special waste under the EPA's hazardous waste
management program which could have a significant impact on the management, beneficial use and disposal of coal combustion
residuals. FirstEnergy's future cost of compliance with any coal combustion residuals regulations that may be promulgated could
be substantial and would depend, in part, on the regulatory action taken by the EPA and implementation by the EPA or the states.
Compliance with those regulations could have an adverse impact on FirstEnergy's results of operations and financial condition.
LBR CCB impoundment is expected to run out of disposal capacity for disposal of CCBs from the BMP between 2016 and 2018.
BMP is pursuing several CCB disposal options.
Certain of our utilities have been named as potentially responsible parties at waste disposal sites, which may require cleanup under
the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. Allegations of disposal of hazardous
substances at historical sites and the liability involved are often unsubstantiated and subject to dispute; however, federal law provides
that all potentially responsible parties for a particular site may be liable on a joint and several basis. Environmental liabilities that
are considered probable have been recognized on the consolidated balance sheet as of December 31, 2011, based on estimates
of the total costs of cleanup, the Utility Registrants' proportionate responsibility for such costs and the financial ability of other
unaffiliated entities to pay. Total liabilities of approximately $106 million (JCP&L - $70 million, TE - $1 million, CEI - $1 million, FGCO
- $1 million and FE - $33 million) have been accrued through December 31, 2011. Included in the total are accrued liabilities of
approximately $63 million for environmental remediation of former manufactured gas plants and gas holder facilities in New Jersey,
which are being recovered by JCP&L through a non-bypassable SBC. On July 11, 2011, FirstEnergy was found to be a potentially
responsible party under CERCLA, indirectly liable for a portion of past and future clean-up costs at certain legacy MGP sites,
estimated to total approximately $59 million. FirstEnergy recognized an additional expense of $29 million during the second quarter
of 2011; $30 million had previously been reserved prior to 2011. FirstEnergy determined that it is reasonably possible that it or its
subsidiaries could be found potentially responsible for additional amounts or additional sites, but the possible losses or range of
losses cannot be determined or reasonably estimated at this time.
OTHER LEGAL PROCEEDINGS
Power Outages and Related Litigation
In July 1999, the Mid-Atlantic States experienced a severe heat wave, which resulted in power outages throughout the service
territories of many electric utilities, including JCP&L. Two class action lawsuits (subsequently consolidated into a single proceeding)
were filed in New Jersey Superior Court in July 1999 against JCP&L, GPU and other GPU companies, seeking compensatory and
punitive damages due to the outages. After various motions, rulings and appeals, the Plaintiffs' claims for consumer fraud, common
law fraud, negligent misrepresentation, strict product liability and punitive damages were dismissed, leaving only the negligence
and breach of contract causes of actions. On July 29, 2010, the Appellate Division upheld the trial court's decision decertifying the
class. In November 2010, the Supreme Court issued an order denying Plaintiffs' motion for leave to appeal. The Court's order
effectively ends the attempt to certify the class, and leaves only 9 plaintiffs to pursue their respective individual claims. The matter
was referred back to the lower court, which set a trial date for February 13, 2012, for the remaining individual plaintiffs. Plaintiffs
have accepted an immaterial amount in final settlement of all matters and the settlement documentation is being finalized for
execution by all parties.
Nuclear Plant Matters
Under NRC regulations, FirstEnergy must ensure that adequate funds will be available to decommission its nuclear facilities. As of
December 31, 2011, FirstEnergy had approximately $2 billion invested in external trusts to be used for the decommissioning and
environmental remediation of Davis-Besse, Beaver Valley, Perry and TMI-2. As required by the NRC, FirstEnergy annually
recalculates and adjusts the amount of its parental guarantee, as appropriate. The values of FirstEnergy's NDT fluctuate based on
market conditions. If the value of the trusts decline by a material amount, FirstEnergy's obligation to fund the trusts may increase.
Disruptions in the capital markets and their effects on particular businesses and the economy could also affect the values of the
NDT. On March 28, 2011, FENOC submitted its biennial report on nuclear decommissioning funding to the NRC. This submittal
identified a total shortfall in nuclear decommissioning funding for Beaver Valley Unit 1 and Perry of approximately $92.5 million. By
letter dated December 29, 2011, FENOC informed the NRC staff that it had increased the parental guarantee to $95 million.
In January 2004, subsidiaries of FirstEnergy filed a lawsuit in the U.S. Court of Federal Claims seeking damages in connection with
costs incurred at the Beaver Valley, Davis-Besse and Perry nuclear facilities as a result of the DOE's failure to begin accepting
spent nuclear fuel on January 31, 1998. DOE was required to begin accepting spent nuclear fuel by the Nuclear Waste Policy Act
(42 USC 10101 et seq) and the contracts entered into by the DOE and the owners and operators of these facilities pursuant to the
Act. In January 2012, the applicable FirstEnergy affiliates reached a $48 million settlement of these claims.
In August 2010, FENOC submitted an application to the NRC for renewal of the Davis-Besse operating license for an additional
twenty years, until 2037. By an order dated April 26, 2011, a NRC ASLB granted a hearing on the Davis-Besse license renewal
application to a group of petitioners. By this order, the ASLB also admitted two contentions challenging whether FENOC's
Environmental Report adequately evaluated (1) a combination of renewable energy sources as alternatives to the renewal of Davis-
Besse's operating license, and (2) severe accident mitigation alternatives at Davis-Besse. On May 6, 2011, FENOC filed an appeal
with the NRC from the order granting a hearing on the Davis-Besse license renewal application. On January 10, 2012, intervenors
petitioned the ASLB for a new contention on the cracking of the Davis-Besse shield building discussed below.